Who Gets The Credit (and Blame) In Round Lake?

On Friday the Daily Herald ran an article covering the resignation of Dennis Stonewall as CEO of the Round Lake Area Schools. Jason King, the writer, went on to subtly give credit to Mr. Stonewall accurately pointing out “Under his direction and that of his chief financial officer, Walter Korpan, the duo has dramatically improved the district’s finances.” While this may be accurate, in that the rewards of the turnaround came during his tenure, it would be incorrect to start or stop there with who deserves the credit.

To figure this out we have to do a little time trip and that most appropriately begins when the state came in with the Financial Oversight Panel (FOP), the predecessor to the School Finance Authority (SFA). This is where we get to our first people who get credit.

First off, in my mind, is Eric Anderson from Harris Bank. Just prior to the state coming in Mr. Anderson and Harris had stepped up to be the district’s main finance broker. Whenever a bond, tax anticipation warrant, or other financial instrument needs to be executed the Board has to find buyers and that is what Mr. Anderson does. This was not a fun job to have when he got here and, in fact, he made it clear to the Board at the time that he was not going to be able to find a buyer for many more tax anticipation warrants as the district was in the unheard of position of procuring them on taxes it wouldn’t receive for another two years. From many I have talked to it was Mr. Anderson’s emphatic plea to the Board that finally forced them to request the State Board of Education (ISBE) put a FOP in place in Round Lake.

Shortly after that the panel was appointed and my second recipient of credit was appointed the chair, Marc Spivak. Mr. Spivak, an attorney with Topper & Weiss in Chicago and a former school board president, brought the calm, analytical demeanor needed to succeed in this position because in the district, things are coming unhinged. Bill Thompson and Joe Monahan two retired school business managers brought the in-depth knowledge and skill to assess where things were at and get Round Lake going in the right direction.

The FOP brought in several consultants, the first being Lutaf Dhanidina. Mr. Dhanidina had served as director of financial planning for the Chicago Public School and was most recently Chief Financial Officer for Evanston/Skokie District 65. Mr. Dhanidina or “Lutaf” as we would all call him because of his difficult to pronounce last name, began an in depth analysis of the district’s financial status and something that hadn’t been done for some time, projections for its future status. It was these projections, and how dire they looked, that led ISBE to get legislation to put a Finance Authority in Round Lake and eventually cause the FOP to request such an authority. It wasn’t the only thing that caused that though.

The Board fought with the FOP tooth and nail. Immediately after my election in April 2001 I began direct communications with Mr. Spivak in an attempt to get the Board to work cooperatively with the FOP and not against them. After I was seated, aside from the lambasting I would get from my fellow members, closed sessions were full of disdain for the FOP and representatives from ISBE. I remember them being referred to as “egg heads”, “bean counters” and “smarmy”. This Board was suffering from what is commonly referred to as “bunkering” — perceiving threats from all sides and then engaging in paranoid behavior that everyone is out to get them. The truth of the matter was, they were here to get it straightened out and had they cooperated, the SFA might never have come to pass.

This leads us to some blame. No individual board member or board officer is responsible for what happened in Round Lake, it was a collective failure. Nor is it the fault of Dr. Mary Davis our former superintendent because at the end of the day the Board sets the agenda and that agenda was faulty for a number of years going back to when Dr. Clif Houghton was forced to retire. The subsequent Boards would follow a philosophy of having an educational program no matter what the cost to the district. This is the faulty reasoning of many many board members and not just those in Round Lake. A board member is not there to do it “for the kids”, the board member should do what is right for the kids within the restraints of the community’s wishes. If the Board has inadequate funding it goes to referendum, if the community believes the funding it is needed it provides it (as the people of Round Lake have done many times) or it does not. It’s then up to the Board to act with this mandate from the people, not to mandate to the people what they will pay for.

Additionally the district did not have a clean handoff from our prior Business Manager to the one in place when I came to the Board. She was quite clearly totally overwhelmed by the scope of the position. I believe she did the best she could but the task was beyond her and the support system wasn’t there for her either. The district needed a strong business manager who would be able to take on this task and then put the support system in place himself. That person turned out to be Walter Korpan.

When Mr. Korpan was hired I caused a big stink about how it was done. He was picked, the Board President had agreed to the pick and the Board was to rubber stamp his appointment. I was concerned a more thorough search wasn’t done. After interviewing Mr. Korpan though I became convinced, and I told him so at the meeting, that I was pleased with the selection and would vote for it despite my misgivings on how it was done.

Mr. Korpan has done the yeoman’s effort in getting this district turned around but he would be the first to tell you he had a lot of help. However, one cannot deny the fact that two things started things going down the right path — insistence on a balanced budget from the FOP and Walter Korpan overhauling the districts business practices. For years our auditors Eder, Casella & Co. had warned of poor business practices, they just weren’t followed. In fact, the district illegally transferred funds several times. Mr. Korpan immediately made sweeping changes including overhauling the district’s method of taking attendance which recouped the loss of state funding (since all state funding is based on Average Daily Attendance (ADA) within the district). We couldn’t even properly tell the state how many kids we had in class!! He started there and went on to running a lunch program that broke even instead of losing money, creditors who held intercepts on our tax money had proper balances set aside to disable the intercepts, and many other significant changes.

The results are plain to see. In FY2001 the district ran a deficit of $1.05 mil, with $23.4 3mil in state funding and $17.68 mil in local funding according to ILEARN. Some of this deficit is actually incorrect since the district had money expended for construction projects that were previously bonded (i.e. in FY2000 the district got money for a project not done and paid for until FY2001 so a deficit will be shown). But this is where local funding numbers started to step up, in FY2002 state funding was $21.81 mil (49%) and local funding was $19.87 mil (45%), up two million from the prior year. In FY2003 state funding was $20.77 mil (47%) and local was $21.18 mil, up another million and change.

However, in FY2004 the first “benefit” of the SFA went into effect. As part of the legislation that created the Round Lake SFA, known as the Downstate Finance Authority Act, the district got to “reset” its tax cap for one year. That is, the district was no longer bound by the tax caps imposed on every other district (except Chicago) in Illinois which limits the amount of taxes they can levy. In other words, a district has authority from taxpayers to levy a certain amount in taxes and can increase that amount from year to year based on rises in cost of living, etc. Most district in Illinois can’t raise it to that cost of living because of tax caps, Round Lake could in FY2004. So, in FY2004 state funding was $24.47 mil (46%) and local funding was $26.57 mil (50%). For the first time in years the district got more from its taxpayers than it did from the state. In FY2001 the number was 41% and had been for a number of years, it moved up 9% in three years and with static state funding, that has been a major reason for the turnaround in the district.

For FY2005 that number has dipped a bit. But the Equalized Assessed Valuation (EAV) of the district continues to grow. EAV is the value of taxable property in the district, EAV per pupil is a key figure in discriminating poorer districts from affluent ones. In FY2001 the EAV per pupil was $55,925 and ranked 281st in the state. In FY2005 it is now $69,776 and 257th in the state. This rise has accounted for the nearly $7 mil per year the district has available and, together with sound financial policies, this is why the district is getting turned around and future projections continue to look good. So, my #1 serving of credit for the turnaround in Round Lake? The Round Lake taxpayers who endured their tax caps protection being lifted and continue to live under the threat of mandated taxes without referendum — taxation without representation by an appointed SFA.

So, does Mr. Stonewall deserve some credit? Absolutely. Does the Board, that has continued to wrangle with him, this author being one of the lead antagonists, still have concerns? You betcha. I’m concerned with our administrative turnover. I’m concerned with use of authority (such as with the use of Magee I covered earlier) without consultation with either the Board or the SFA. I’m concerned with our three-headed administrative structure that can result in miscommunication or lack of communication. I’m concerned about administrative costs. I’m concerned that we had a referendum pass yet the only sizable construction work that got done this summer was the administrative building parking lot.

Frankly, I was dismayed when Mr. Stonewall told us point blank that he was going to abide by our decision to fund the mobile classrooms project with fund balances and then went to the SFA with his plan to have them issue bonds anyway. Fortunately the SFA unanimously voted that down. Finally, I’m concerned that we don’t truly have a superintendent.

Why is that important? There are things a chief executive in a school district has to do that are not merely business. I applaud good business sense in all decisions and I frequently question our administration on how we spend money. However, there are some real truths to school districts. First off, no, we do not have “customers”. The “customer” in schools is the taxpayer, not the parents. There are thousands of people in our district — seniors, young people without children, those who send their children to private schools, to name a few — who do not use our services but pay for them. This is a huge fundamental fact that cannot be taken for granted or denied. I am all for better customer service for those who do use our services but our responsibility, our accountability, is to the taxpayer and not to the parents alone. I think the vast number of those taxpayers understand how important a good public school is to our community’s well-being and success. We need to educate them on that though so they understand what we’re doing, how we’re doing it, and that we’re being responsible with their hard earned money, money that for everyone is the largest single item on our property tax bill.

Additionally there are nuances of labor relations, state standards, community outreach, and other items that an experienced superintendent comes to grasp. And, finally, a good superintendent knows he/she serves at the pleasure of the Board but is not afraid to tell the Board when it’s doing something wrong. Had we a Board that more properly understood this oversight role and a Superintendent willing to stand up and insist on proper business practices and accounting then perhaps this entire issue of who gets the credit for Round Lake rebounding wouldn’t be necessary.